Are 1-Bedroom Condos a Bad Buy? 640 W. Waveland in Lakeview
This 1-bedroom in the Waveland Court Condos at 640 W. Waveland in Lakeview recently came on the market.
It’s been 5 years since we chattered about this 50-unit complex which was built in 1926.
Back in the bust years, we covered it quite a bit as many of the condos were in foreclosure.
See our 2012 chatter about a bank owned 1-bedroom here.
Ironically, this unit is also a Fannie Mae HomePath property.
It has hardwood floors throughout.
The living room has a wood burning fireplace.
The kitchen has white cabinets and stainless steel appliances.
It has some features that buyers look for such as an in-unit washer/dryer which is located in the kitchen.
The unit doesn’t have central air but it looks like some condos have window a/c units, nor is there parking.
Listed by Fannie Mae at $208,000, that’s just $8,000 above the 2008 purchase price.
This unit has been sold 4 times since 2003. This sale will be the 5th.
Is it a bad financial investment to buy a 1-bedroom condo?
Jason Reiner at Solid Realty Services has the listing. See the pictures here.
Unit #4B: 1 bedroom, 1 bath, no square footage listed
- Sold in July 2003 for $165,500
- Sold in September 2005 for $194,000
- Sold in April 2008 for $200,000
- Sold in December 2009 for $183,000
- Lis pendens foreclosure filed in September 2016
- Bank owned in October 2017
- Currently listed for $208,000
- Assessments of $326 a month (includes heat, cable, exterior maintenance)
- Taxes of $2511
- No central air
- Baseboard heating
- No parking
- Wood burning fireplace
- Bedroom: 13×10
- Living room: 18×13
- Kitchen: 11×11
LUV THIS PLACE!
MORTGAGE FRAUD RULEZ!!!!!!!
WHY EVER CONVERT A 2BR to 1BR? NEVER KNOWZ!!!!
FAIL FIRSTIES!!!!!!!!!
yikes do people actually live like this in the USA in the year 2017?
I don’t think 1 bedrooms are a wise buy in Chicago unless:
1) you are a single cat lady with no prospects for the long term.
2) you are buying for a child
3) plan on renting out the unit
4) I have not seen a big price difference between 1 and 2 bedrooms and with interest rates so low, why not get a 2nd room even if you just use it as an office or junk room?
I have seen some rehabbed two bedrooms that were clearly the bedrooms with the dining room turned into a bedroom or the entire floor plan rearranged poorly make it a 2 bedroom. Some would rather have more living space than have a closed off second bedroom. And cue the thumbs down.
This place is gross though.
Russ –
What about DINK couples who would rather sacrifice the 2nd bed or bathroom in favor of living in a more centralized location? My wife and I are considering this route in order to afford a decent quality place (with parking) in River North/LP/Old Town vs Ravenswood/Lincoln Square/Andersonville – the latter choices are all good neighborhoods but would make our commutes suck.
But I agree with you that generally 1 bedrooms are not great investments. You get the deals on them when you buy, and typically struggle when you sell, which is why we’d probably rent it if we chose to move.
This place is so dreary. I can see there being a market for one bedrooms, but not this one bedroom. My grandparents lived in a one bedroom condo for over 30 years and were happy. They had a great view though and the unit was bright and sunny.
Elliot, everyone decides what is most important to them when it comes to a property. For some people, a 1 bed may work.
In my experience, 1 beds just don’t seem like a good choice for typical condo buyers unless you are in the group I pointed out above. 2 bed/2 baths can start to feel small even for DINKs, so people outgrow 1 bedrooms real quick. You also tend to accumulate more stuff when you own.
Also, given Chicago is somewhat of an expensive city, most buyers are going to be dual income and they are going to want more space so you have a limited buyer pool when you sell too.
I just feel like if you all you can swing is a 1 bed, you are better off renting.
I don’t know. A 1 BR cool space in 860 or 880 LSD? Sure. A 1BR on the second floor of a courtyard building in Rogers Park? Maybe not. I think it depends on the 1BR. However, I will say I know someone who bought a STUDIO on LSD near Addison in the 90s for 33K. Say what you want, but he sold it a handful of years later for more than 300% of what he paid, and it still seems cheap.
“and it still seems cheap”
As long as a 1br is cheap, sure, no issues.
I lived in a couple of (rental) places not too dissimilar to this one, for CPI-adjusted rents of about $1000. If you could buy this for a monthly nut of about $1000, and ~10% down, that would qualify as “cheap” to me, for the overall unit quality.
Thus, it seems about 100% overpriced to be “cheap”. That’s not a realistic price in this market, of course, but I could get behind buying this sort of place at $125k with a less than 5 year horizon, where at $200k, Russ’s list is really the limits of the “right” buyer.
I paid $150k cash for my 1 bedroom condo in the south loop during the bust. Lived there for the 1 year min. owner occupancy requirement and then rented it out for $1500/mo. It’s a decent investment. My fixed expenses are the $400 HOA + property taxes of about $200/mo. Since I don’t have a mortgage, I make about $700-900/mo on it depending on expenses.
However, if I had a mortgage (at 20% down) my monthly mortgage expense would be about $550/mo, which would leave me with a tiny$150-350 profit per month, but of course I would be building equity as my tenant would be paying my mortgage for me.
So overall, I would say 1 bedroom is only good for temporary living while single, then renting for a small profit.
z’Since I don’t have a mortgage, I make about $700-900/mo on it depending on expenses.”
So it will take you 15 years to make back the $150K and then the rest is pure profit
Also you were lucky in that you bought very low and after the market corrected for the bust you have high market value rent. This cannot always be counted on.
“So it will take you 15 years to make back the $150K”
Ignoring tax consequences, which cut both ways.
6.5 cap is pretty ok in the current environment, especially with some inflation protection on the principal.
Is the place still worth 150k or more? If it’s worth more, the cap rate is lower. Say 185k your cap rate drops to 5ish. Overall, its not bad and without knowing how much liquid investments you have, the S&P500 probably would have worked out much better. If this condo is smaller portion or your asset allocation, then keep on truckin.
This seems like the type of property that might have a buyer who makes an offer on the entire property. It really should be a rental – – and if this unit is in anyway representative of other interiors, it is the way to go. Current owners would then get to monetize common elements which you never get to do when you just sell your unit.
This place is too sad for ownership.
1BRs make great part time homes – – and I agree with others, unless they are in an unbelievable location where they are also in short supply and housing costs are high, they don’t make sense unless you are in a position to hold them for a long time as a rental or just otherwise intend to own / occupy it for a looooong time.
oh and we forgot Cleo’s favorite:
5) as A pied-à-terre
^ no lambo parking
you can buy a house and get a FREE Lambo here.
https://www.redfin.com/IL/Chicago/22-E-Elm-St-60611/home/12842554
Is that a staged garage on Elm St?
Anyway, I’d take the “Fugitive” house and renovate it for less.
“I paid $150k cash for my 1 bedroom condo in the south loop during the bust.”
I wonder what this cash would be worth if it had been put in an S&P 500 index fund- with dividends reinvested?
Even if put it in 2012 (bottom of the housing market) you probably would have doubled your money.
“1) you are a single cat lady with no prospects for the long term.
2) you are buying for a child
3) plan on renting out the unit”
Thanks for the sexist comment Russ.
Why can’t it be a single guy with a neon beer sign and a black fake leather sofa? I’ve seen plenty of those buying 1-bedrooms in Chicago too. Average age for men to marry now is nearly 30. What are they doing from 22-30? They’re buying condos. And not everyone can afford a 2-bedroom in their chosen neighborhood.
“I wonder what this cash would be worth if it had been put in an S&P 500 index fund- with dividends reinvested?
Even if put it in 2012 (bottom of the housing market) you probably would have doubled your money.”
On the other hand, stocks tend to be riskier investments than real estate historically.
Additionally the market value has risen from $150k to about $180k now, while at the same time, I’ve been making a small yearly profit.
The reason why people choose real estate investing vs. the S&P is the lack of a paper trail in real estate. Every penny you make in the S&P is documented.
I know many people that don’t even claim much of the income they get on real estate. Comparing real estate vs the S&P is apples/oranges.
“I paid $150k cash for my 1 bedroom condo in the south loop during the bust. Lived there for the 1 year min. owner occupancy requirement and then rented it out for $1500/mo. It’s a decent investment. My fixed expenses are the $400 HOA + property taxes of about $200/mo. Since I don’t have a mortgage, I make about $700-900/mo on it depending on expenses.”
What would worry me would be the special assessments. One of those can wipe out your profit for the entire year. I don’t know anyone in a condo who has escaped them. From high end to low end, these buildings can’t seem to budget for big expenses. I thought I was safe because my building had $10,000 in reserves for each unit. I was wrong.
“On the other hand, stocks tend to be riskier investments than real estate historically.”
Are you kidding? Can we have a source, please?
“Are you kidding?”
If you ignore leverage, which we are for the scenario offered, that’s no joke. Stocks go to zero a lot more often than a building does.
But with more typical 80% leverage, yeah, you’re definitely right.
“On an inflation-adjusted, net of all related maintenance and tax expenses, US large cap stocks (like the S&P 500 Index) have performed much better than US residential real estate by a factor of 2X, depending on your time period of evaluation.” – Investopedia
“I know many people that don’t even claim much of the income they get on real estate. Comparing real estate vs the S&P is apples/oranges.”
Tax fraud aside, real estate has favorable tax treatment, including depreciation, interest and costs deductions and the ability to 1031 exchange. Income is also not subject to fica taxes or self-employment tax. Also, for inherientce purposes, your heirs get the stepped up basis when you die, so it’s basically tax free capital gains to your heirs.
“depending on your time period of evaluation”
That’s key.
So, that $100k I invested in pets.com didn’t actually go to zero?
And that pets.com investment is doing better than the $100k condo I bought (with cash!) in Harvey in 1999?
And that pets.com investment is doing better than the $100k condo I bought (with cash!) in Harvey in 1999?
So you are HD’s neighbor?
“So you are HD’s neighbor?”
HD’s over in Ford Heights, but close enough.
“And that pets.com investment is doing better than the $100k condo I bought (with cash!) in Harvey in 1999?”
So you’re going to pick one company that didn’t make it and argue that that’s why stocks are a bad investment?
Where are you if you had bought the S&P 500 in 1999 versus your condo in Harvey?
Stocks have out performed all other asset classes over the last 100 years. Of course, there are exceptions. If you bought a house in Pebble Beach, near the golf course, in like 1970 for $20,000 it’s worth far more than a stock portfolio today. Now THAT was an “investment” of a life time.
But 99% of people didn’t buy that house. They bought a house in Forest Park. Or Des Moines. Or Riverside, California.
Similarly, all stock investors aren’t Warren Buffett either.
But the fact that you’re going rah-rahing about real estate again is a really, really good sign for the stock market.
“On an inflation-adjusted, net of all related maintenance and tax expenses, US large cap stocks (like the S&P 500 Index) have performed much better than US residential real estate by a factor of 2X, depending on your time period of evaluation.” – Investopedia
Thank you ChicagoDog.
The longer you hold, the better off you are. It’s called the magic of compounding.
And, of course, with any asset, it depends on when you buy it.
Did you want to buy real estate in 1982 or stocks in 1982? No one wanted the stocks. They couldn’t give them away. But those investors got rich in just 18 years.
“Stocks go to zero a lot more often than a building does.”
They do?
Maybe you should talk to those in Puerto Rico and Sonoma California. Or chat with some down in New Orleans. Or in Houston.
But I digress.
When was the last time the S&P 500 went to zero? Or the NASDAQ? Or the Dow Industrials? Or the Russell 2000?
I guess I missed that.
“Stocks go to zero a lot more often than a building does.”
And when another big quake hits California, there will be a lot of people looking at “zero” there. Same in Miami when the ocean floods that city. Ditto in Key West. Lots of people going to zero there in our lifetime.
I’m not sure what you’re saying anon(tfo). Many buildings are at risk of going completely to zero. Millions of them aren’t insured in California, for instance. What will happen to that wealth then?
“I don’t know anyone in a condo who has escaped them. From high end to low end, these buildings can’t seem to budget for big expenses. I thought I was safe because my building had $10,000 in reserves for each unit. I was wrong.”
It’s true, Jenny, that specials will happen to most buildings. But they will happen to 3-flats too.
But there are some buildings downtown that have NEVER had a special assessment. And they’re old buildings. Now that’s great management. I’ll do some posts on some of them. We should highlight those that are well run.
“On the other hand, stocks tend to be riskier investments than real estate historically.”
A statement like this is the result of the big secular bear market we just had (although it ended several years ago.) This is why, at the beginning of a stock bull, investors ignore it. They still think market conditions suck the same way they did in 2008 and 2009. Or 1972-1974. This is why so many are still buying bonds right now (bonds! Lol.)
It took investors who were burned by stocks in the 1970s all the way until the early 1990s to start buying in again.
So am I surprised people are spending cash for condos? No.
I don’t think its that bad? If I can get it for 10% lower, I would have lived in this. Does the fireplace work?
“Maybe you should talk to those in … Sonoma California.”
Who is giving away their land in Sonoma? I will take 100% of the free land in Sonoma today.
Oh, you weren’t serious? You just meant “close to zero”? Well, alright then.
” Many buildings are at risk of going completely to zero.”
And the land becomes worthless, too?
“When was the last time the S&P 500 went to zero? Or the NASDAQ? Or the Dow Industrials? Or the Russell 2000?”
When was the last time a portfolio of 500/2000 properties across the country went to zero? Or all of the residential properties in the country? Or the 30 “blue chippiest” commercial properties in the country?
You’re comparing apples and the apple crop, when I said some apples are rotten.
“When was the last time a portfolio of 500/2000 properties across the country went to zero?”
2008.
Okay- maybe $100. In many places, including Detroit and Cleveland.
“And the land becomes worthless, too?”
What’s your “land” worth in Key West when there are fishies swimming over it?
Zero.
“Who is giving away their land in Sonoma? I will take 100% of the free land in Sonoma today.”
The argument was that stocks go to zero (which the S&P 500 never has.) Now you switch your argument to a “basket” of housing when we were discussing whether or not paying $150,000 cash for a South Loop condo was a less risky investment than investing in stocks.
She didn’t buy a basket. She bought one. I said to buy the S&P 500 (not just one). You don’t understand the argument. Clearly.
But I think we can agree. Buying one piece of property is MUCH riskier of going to zero than buying a basket of the S&P 500. In some cases, buying the piece of property can mean you lose EVERYTHING. In other cases you will lose close to everything.
The stock market is amazingly risk free if you own for decades. It has only fallen 3 years in a row one time. And has only fallen two years in a row two times. Even the huge 40%+ drops that everyone fears have rarely happened since 1945 in a single year (just once, I believe.)
But if someone wants to spend cash on real estate that could be wiped away by water, earthquake, fire, other natural or unnatural disaster- feel free.
Sure, there is insurance. But if you’re in Key West or Miami, it’s not going to be of much help in the next few decades. And those in Puerto Rico, the Virgin Islands and St. Martin can show you their “land” tomorrow. And sure, there’s some value there.
But no one should argue that real estate doesn’t have immense risks.
Didn’t know Jim Cramer ran the blog
Your comment about The USVI is misinformed (Would assume PR as well but don’t have any first hand info). Plenty of houses survived major Hurricanes (Hugo, Marilyn) previously and survived this season. The Islands version of the Green zone is not a wasteland.
The bigger issue affecting pricing is economic/Gov
“Buying one piece of property is MUCH riskier of going to zero than buying a basket of the S&P 500.”
That wasn’t the initial proposition. But whatever.
“Plenty of houses survived major Hurricanes (Hugo, Marilyn) previously and survived this season.”
Most of St. John did not survive JohnnyU. Neither did the BVI. Neither did St. Martin/St Marteen. Yes, St. Thomas and St. Croix weren’t hit as hard. Didn’t mean that thousands of people didn’t lose everything.
How many had insurance? How many could rebuild at all? How many foreclosures will there be on their “land”?
We won’t know for months/years but it won’t be pretty.
They’ll rebuild the same way they did after Hugo, Marilyn, etc. Unless you think everyone on island lives in a cardboard box or left the island
How would STT not be hit as hard as STJ & the BVI’s considering their poximity? STX didn’t get the full impact of Maria but did with Irma
Closed at $187,500, Apr-18.